The movement of goods to the market is integral to logistics. In addition to the functionality and quality of the product, the customer is increasingly valuing the overall buying experience as an integral factor in customer satisfaction. Therefore, ensuring goods are delivered on time, undamaged and in the quantities required are major factors in achieving competitive advantage. As a result, efficient transportation is vital to an organisation.
The effectiveness of transportation is determined by transport modes and operating decisions, as well as the infrastructure available and any transport policies and regulations. Therefore, optimising these factors is vital to providing efficient logistics operations. Third party logistics providers such as FedEx and UPS operate a hub and spoke network to achieve this. As illustrated in Figure 1, a hub and spoke network is a centralised, integrated logistics system designed to improve efficiency. Hub and spoke distribution centres receive products from many different origins, consolidate the products, and send them directly to destinations. In this example, FedEx designed a hub and spoke network for transporting packages via air and road to provide fast delivery times for customers.
Figure 1: Hub and Spoke Network